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The Terminal Condition of Cleveland Hospitals

Almost overnight, there's been a rash of hospital closings in Cleveland. It's left many in the community trying to figure out exactly what's happening to institutions that have served neighborhoods for generations. Meanwhile, temperatures are rising as the mayor, city council, community leaders, and others argue over how to keep the hospitals open. But the diagnosis could be fatal because of a lack of cash in their diets. Mike West probes the changing hospital industry.

Mike West- The hospital business is not an easy way to make a buck and it's getting tougher all the time. About 2 months, ago the owners of Mt. Sinai Hospital Primary Health Systems, announced they were closing the medical facility. Then Saint Michael Hospital and Mt. Sinai East were also diagnosed with terminal conditions. The closings apparently took city leaders by surprise, even though money problems at PHS had been well known for years, and the company has been in bankruptcy for over a year. Cleveland mayor Michael White says the reasons for the shut-downs include mismanagement, the state's medicaid system and hospital leaders who are greedy and uncaring.

Mayor Michael White- How did we get from hospitals that are supposed to be taking care of people, to businesses, to banks run not by doctors, run not by people who are concerned about whether people are going to live and die, but run by people who are concerned about how much money people are going to make. Or whether (they) can run each other out of business. That's what's going on in this town. None of you are reporting about it. So people like this get crushed...they get hurt and we come in from government and we have to mop up the slop.

MW- Here at University Hospitals of Cleveland, the executive vice president doesn't agree. Orry Jacobs points to an industry that he says could be a victim of it's own advances in medical science.

Orry Jacobs- A tremendous explosion in knowledge and technology, so that we have a lot more of our services being provided on an "out-patient" basis, where you come in and get your surgery and go home the same day, so that the need for hospitals has declined significantly.

MW- Decades ago, most hospitals were concentrated in cities. But starting in the forties, the government began building more hospitals. Jacobs says by the fifties and sixties there was a hospital explosion in rural and inner city neighborhoods. Now there are too many empty hospital beds and not enough patents to go around.

OJ- That has lead to the situation we have now where there are a lot of hospitals all of which are not needed and the debate is are the hospitals that are closing the ones that should be closing. But the way the competitive health care system is played out, those decisions are not necessarily made as rationally as people would like them to be made.

MW- Hospital administrators dream of the old days when most patients paid their bills directly and in cash. But that's become about as common as a doctor who doesn't golf. About 70 percent of the public has private health care insurance, the rest are on medicare, medicaid or don't have any coverage at all. Dave Kantor is a health care consultant. He says "these days" hospitals have to take what they can get from the state, the federal government, insurance companies and HMO's. And he says none of them ever pay in full.

Dave Kantor- Everybody virtually gets a discount today of some sort or other, and the government proclaims how much they will pay, so you might say that the hospital bill is ten thousand dollars, but medicare said a long time ago that we pay based on specific illness categories - and while the overall bill for this might be ten thousand dollars at one hospital, eight grand at another and fourteen thousand at another. Guess what our payment is at? Five thousand dollars and that's all there is.

MW- The situation has turned out to be fatal for struggling hospitals. Kantor says people who pay the very least, or nothing at all wind up in hospitals where doctors can least afford to heal them.

DK- And the real whammy for places like Mt. Sinai and St. Michael's of the world is that because they are in the inner city where .... duh .... the largest percentage of those without insurance at all live, those hospitals end up not having most of their patients getting treatment at a discount. They also have a substantial percentage of their population from whom they get no reimbursement at all.

MW- Doctors get paid for treating the poor through medicaid. The money comes from the state and federal government. It's become a favorite whipping post for hospital administrators and politicians. Bill Hayes is the assistant deputy director of the Ohio office of Medicaid. He says, don't blame his agency for financial problems at hospitals.

Bill Hayes- We aren't sure why medicaid is bearing the brunt of their concerns, as we've looked at the data for these hospitals in particular. We have been paying them at or above their cost reports based on money we've paid for them on fees and the disproportionate share dollars.

MW- "Disproportionate Share" is the name of a state fund used to pay hospitals that show they didn't get paid enough for medicaid patients or indigent care. Hayes also argues that hospitals sign a contract with the state spelling out exactly how much they will pay for various services conducted on medicaid patients, so the program can't be accused of being unfair.

BH- Our payments we feel have been fair and reasonable. And in the hospital side we have annually inflated the prices that we have been paying, both on our in-patient and lately we've had some inflationary increase on our out-patient side.

MW- In the long term hospital forecast, some medical experts believe the pendulum will swing in the other direction. As the baby boom population ages and needs more care and long hospital stays, they're expected to drive up demand for the very beds that are now empty and disappearing.

In Cleveland, I'm Mike West.

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